Quote
“You are no longer asking, 'How can I make my business bigger?' You are asking, 'How can I make my business healthier?'”
— Mike Michalowicz, in Profit First (2014) · Profit First →
Why it was said
Michalowicz uses these two questions to describe the shift in thinking that Profit First asks of a business owner. They come from his argument that chasing revenue growth often hides an unhealthy business, because more sales can bring more expenses and no more profit.
What it actually means
Revenue is the number most owners watch and the easiest to celebrate, yet a business can double its sales and still be unable to pay its owner. Michalowicz's question changes the measure of progress. A healthier business keeps more of what it earns, carries less waste and can survive a slow quarter. Asking about health first often leads to unglamorous moves: cutting costs that do not earn their keep, letting go of unprofitable clients, raising prices. Growth can still follow, but on a sound base.
How to use it
- 1Compare last year's revenue growth with the change in what you actually paid yourself and kept as profit.
- 2Rank your clients by profit rather than revenue, and decide what to do about the least profitable ones.
- 3Cut one recurring cost this month that you could not justify to a customer.